World leaders urge economic reform

Summit in Chile concludes with calls for stricter supervision of financial system.

29 Mar 2009 12:11 GMT

Biden said the massive US stimulus package was necessary to boost the economy [AFP]

Gordon Brown, the UK prime minister who last week alongside Lula, called for the creation of a $100bn global fund to boost trade, warned that the markets could not be relied on to self-regulate.

"We have to be very clear: The banks cannot be without supervision", he said, calling for that supervision to work across borders.

US concerns

But Joe Biden, the US vice-president, urged caution over increasing controls.

"We should not overreact," Biden said at a news conference at the close of the Progressive Governance Summit.

"A free market still needs to be able to function."

Delegates at the summit also discussed issues such as financial accountability, avoiding protectionism and promoting measures to stimulate the economy.

Biden defended his country's $787bn spending package, signed into law earlier in the month by Barack Obama, the US president, as a necessary action to boost sinking US and world economies.

European nations such as France and Germany have expressed concern at US calls to tackle the crisis with more fiscal stimulus instead of regulation.

"We do believe that this is what is necessary to get the engine going again in the States," Biden said, pointing out that the US economy represents 25 per cent of the world's GDP.

"The very good news is that we are willing to and want to collaborate. The bad news is that you don't have the last [US] administration to use as an excuse ... for non-action," he said referring to George Bush, the former US president.

Stimulus plans

Michelle Bachelet, Chile's president and the host of the summit, called for the co-ordination of fiscal stimulus plans across different countries.

She also said that leaders at the summit had agreed to combat protectionism.

"We agreed on putting people first, to avoid the economic recession turning into a social recession," she said.

Ahead of the G20 meeting in London, tens of thousands of protesters have taken to the streets across Europe to protest against job losses and call for reforms by governments that many see as having failed to anticipate the financial crisis.

Biden and Brown called for the protesters to give governments a chance to tackle the situation.